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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
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[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-21467
ACCESSITY CORP.
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(Name of small business issuer in its charter)
New York 11-2750412
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12514 West Atlantic Boulevard
Coral Springs, Florida 33071 (954-752-6161)
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(Address of principal executive offices) (Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock par value $.015 per share
Preferred Stock Purchase Rights par value $.01 per share
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes[X] No[_]
As of August 10, 2004 the issuer had outstanding a total of 2,237,414 shares of
common stock.
Transitional Small Business Format (check one) Yes [_] No [X]
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ACCESSITY CORP.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2004
CONTENTS
PAGE
----
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet
As of June 30, 2004 (Unaudited) .......................... 3
Condensed Consolidated Statements of Operations and
Comprehensive Loss (Unaudited) for the
Three Months ended June 30, 2004 and 2003 ................ 4
Condensed Consolidated Statements of Operations and
Comprehensive Loss (Unaudited) for the
Six Months ended June 30, 2004 and 2003 .................. 5
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Six Months ended
June 30, 2004 and 2003 ................................... 6
Notes to Condensed Consolidated Financial Statements .............. 7
Item 2. Management's Discussion and Analysis or Plan of Operation ......... 16
Item 3. Controls and Procedures ........................................... 20
Part II. OTHER INFORMATION ................................................. 21
Item 6. Exhibits and Reports on Form 8-K .................................. 21
Certifications .................................................... 23
Item 1. Financial Statements
ACCESSITY CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2004
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 230,886
Accounts receivable 128,535
Notes receivable (Note 5) 181,358
Investments 3,543,955
Prepaid expenses and other current assets 125,230
------------
Total current assets 4,209,964
Property and equipment, net of accumulated depreciation 324,333
Restricted certificate of deposit 300,000
Security deposits and other assets 23,924
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Total assets $ 4,858,221
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 41,085
Accrued expenses and other current liabilities 373,419
Capital lease obligation 5,458
------------
Total current liabilities, other than shares 419,962
Redeemable preferred stock, $.01 par value, authorized
1,000,000 shares; 1,000 issued and outstanding; subject
to mandatory redemption of $350,000 (Note 4) 350,000
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Total current liabilities 769,962
------------
Shareholders' equity:
Common stock, $.015 par value, authorized 30,000,000
shares; issued 2,419,398 36,291
Additional paid-in capital 10,751,188
Accumulated other comprehensive loss, unrealized
holding loss on investment securities (10,399)
Deficit (4,959,379)
------------
5,817,701
Less common stock held in treasury, at cost,
181,984 shares 1,729,442
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Total shareholders' equity 4,088,259
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Total liabilities and shareholders' equity $ 4,858,221
============
See notes to condensed consolidated financial statements.
3
ACCESSITY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
Three Months Ended,
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June 30 June 30
2004 2003
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Revenue:
Collision repairs, fees and royalties $ 54,657 $ 49,006
Hospital fees 144,580 62,732
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Total revenues 199,237 111,738
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Operating expenses:
Collision repair expenses -- 3,483
Sales and marketing 116,644 109,892
General and administrative 415,660 433,268
Depreciation and amortization 59,636 85,123
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Total operating expenses 591,940 631,766
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(392,703) (520,028)
Investment and other income, net of interest expense (Note 5 and 11) 235,865 44,396
----------- -----------
Loss from continuing operations before provision for income taxes (156,838) (475,632)
Provision for income tax benefit 11,525 --
----------- -----------
Loss from continuing operations (145,313) (475,632)
Discontinued operations (Note 7):
Income from affinity services subsidiary (no tax effect) -- 47,228
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Net loss (145,313) (428,404)
Other comprehensive - unrealized (loss) on
marketable securities (Note 11) (10,399) (1,275)
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Comprehensive loss $ (155,712) $ (429,679)
=========== ===========
Basic and diluted earnings (loss) per common share:
Continuing operations $ (0.06) $ (0.22)
Discontinued operations 0.00 0.02
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Total $ (0.06) $ (0.20)
=========== ===========
Weighted average number of common shares outstanding 2,237,414 2,173,885
Effect of dilutive securities, stock options and warrants -- --
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Basic and diluted weighted average number of common shares outstanding 2,237,414 2,173,885
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See notes to condensed consolidated financial statements.
4
ACCESSITY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
Six Months Ended,
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June 30 June 30
2004 2003
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Revenue:
Collision repairs and fees $ 95,234 $ 190,266
Hospital fees 330,254 62,732
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Total revenues 425,488 252,998
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Operating expenses:
Collision repair expenses -- 100,996
Sales and marketing 222,883 248,969
General and administrative 941,026 930,352
Depreciation and amortization 118,556 169,385
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Total operating expenses 1,282,465 1,449,702
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(856,977) (1,196,704)
Investment and other income, net of interest expense (Note 5 and 11) 276,150 86,559
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Loss from continuing operations before provision for income taxes (580,827) (1,110,145)
Provision for income (tax) benefit 11,525 --
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Loss from continuing operations (569,302) (1,110,145)
Discontinued operations (Note 7):
Income from affinity services subsidiary -- 188,306
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Net loss (569,302) (921,839)
Other comprehensive - unrealized (loss) on
marketable securities (Note 11) (10,399) (20,957)
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Comprehensive loss $ (579,701) $ (942,796)
=========== ===========
Basic and diluted earnings (loss) per common share:
Continuing operations $ (0.25) $ (0.51)
Discontinued operations 0.00 0.09
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Total $ (0.25) $ (0.42)
=========== ===========
Weighted average number of common shares outstanding 2,237,414 2,173,850
Effect of dilutive securities, stock options and warrants -- --
----------- -----------
Weighted average diluted common shares outstanding 2,237,414 2,173,850
=========== ===========
See notes to condensed consolidated financial statements.
5
ACCESSITY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
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June 30 June 30
2004 2003
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Cash flows provided by (used in) operating activities:
Net income (loss) $ (569,302) $ (921,839)
=========== ===========
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization (including bond premium
amortization) 118,556 188,912
Loss on sale of investments 11,669 14,919
Impairment losses on marketable securities 72,750 --
Options granted for services -- 8,955
Changes in assets and liabilities:
Accounts receivable 27,561 (81,198)
Prepaid expenses and other assets 18,695 226,244
Accounts payable (11,112) (128,166)
Accrued expenses and other current liabilities (45,480) (464,695)
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Total adjustments 192,639 (235,029)
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Net cash provided by (used in) operating activities (376,663) (1,156,868)
=========== ===========
Cash flows provided by (used in) investing activities:
Notes receivable (181,358)
Purchase of property and equipment (3,867) (28,211)
Proceeds from sale of investments 800,000 6,349,183
Purchase of investments (87,873) (4,949,302)
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Net cash provided by (used in) investing activities 526,902 1,371,670
=========== ===========
Cash flows provided by (used in) financing activities:
Payments under capital lease (14,928) (15,516)
Proceeds from sales of common stock -- 27,188
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Net cash provided by (used in) financing activities (14,928) 11,672
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Net increase (decrease) in cash and cash equivalents 135,311 226,474
Cash and cash equivalents at beginning of period 95,575 908,655
=========== ===========
Cash and cash equivalents at end of period $ 230,886 $ 1,135,129
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Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 351 $ 2,720
=========== ===========
Reclassification of preferred stock from equity to liability
resulting from repurchase agreement $ 350,000 $ --
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See notes to condensed consolidated financial statements.
6
ACCESSITY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2004
(UNAUDITED)
1. BASIS OF PRESENTATION
---------------------
The information contained in the condensed consolidated financial
statements for the six months ended June 30, 2004 and 2003 is unaudited, but
includes all adjustments, consisting of normal recurring adjustments, which the
Company considers necessary for a fair presentation of the financial position
and the results of operations for these periods.
The financial statements and notes are presented in accordance with the
requirements of Form 10-QSB, and do not contain certain information included in
the Company's annual statements and notes. These financial statements should be
read in conjunction with the Company's annual financial statements as reported
in its most recent annual report on Form 10-KSB.
In May 2004 the Company signed a definitive agreement, characterized as
a share exchange transaction, which if approved by our shareholders would change
the business model of the Company to the business of the acquired company and
require the resignation of the present officers and directors. See Note 3.
Upon approval from its shareholders at the December 15, 2003 annual
shareholders meeting, the Company effected a one-for -five reverse common stock
split. The effective date of the stock split was January 7, 2004. All references
to common shares, options, warrants or other issues convertible into common
shares have been adjusted to reflect this stock split on a retroactive basis.
The number of authorized common shares and the par value were not changed.
On August 1, 2003, the Company sold its affinity service automobile
business (see Note 7). The accompanying financial statements reflect the results
of this business as Discontinued Operations. Accordingly, certain prior period
amounts have been reclassified.
This report may contain forward-looking statements that involve certain
risks and uncertainties. Factors may arise, including those identified in the
Company's Form 10-KSB for the year ended December 31, 2003, which could cause
the Company's operating results to differ materially from those contained in any
forward-looking statement.
2. BUSINESS OF THE COMPANY
-----------------------
THE FOLLOWING INFORMATION IS PROVIDED AS BACKGROUND RELATED TO THE
HISTORIC AND CURRENT BUSINESS ACTIVITIES OF THE COMPANY. AS INDICATED IN NOTE 3,
HOWEVER, THE COMPANY IS CURRENTLY ENGAGED IN A TRANSACTION WHICH, IF CONCLUDED,
WOULD CHANGE ITS BUSINESS MODEL AND DIRECTORS AND OFFICERS.
7
The Company, a New York corporation, had been engaged in automotive
repair and collision management from its inception in 1983, but has exited the
automotive market and entered into a medical billing recovery business. It
divested its original automotive business in February 2002, which provided
collision repair and fleet management services primarily for numerous Fortune
500 companies.
The Company also offered collision repair management services during
early 2003 for the insurance industry through a website on the Internet.
Revenues for such services commenced in December 2001 and continued throughout
2002. However, under a strategic partnership agreement, effective January 2,
2003 (see Note 6), the Company transferred the operating responsibilities and
management of this business to a third party and, currently, is no longer
engaged in collision repair management. During the early part of 2003 it
completed certain in-process repairs that had been initiated by its customers in
late 2002. It remains liable for warranties of auto repairs provided, however
warranty costs have historically not been significant.
In addition, the Company also sold its remaining automotive business,
effective August 1, 2003, that provided automobile affinity services for
individuals. A definitive agreement was completed for the sale of all of the
outstanding shares of its wholly owned subsidiary to the president of the
business (see Note 7). The Company believes that it operated its
automotive-related businesses in one operating segment.
During the 2003 period presented, the Company provided collision and
general repair programs and appraisal services, for the insurance industry and
insurance carriers. The Company facilitated the repair process for insurance
carriers by installing its internet-based software at customer sites, which
permitted them to enter new claims and to monitor the Company's activities. Once
a claim was initiated on the website, the Company commenced its efforts. This
included the audit of repair estimates, negotiation of the repair price with one
of its suppliers selected from its network of approximately 2,000 providers,
management of time for completion of repair, selection or approval of part
specifications, and obtaining third party appraisals if required. The Company
assumed the risks and responsibilities of the vehicle repair process, from
commencement to completion, for its insurance clients. It warranted all repairs
completed through its network of repair facilities, for periods up to as long as
the driver owned the vehicles and issued warranty certificates for claims
processed through its supplier network. The Company recorded revenues gross in
these circumstances, having acted as the principal in the transaction. As
described in Note 6, this business is now managed by ClaimsNet, Inc.
("ClaimsNet").
During the third quarter of 2002, the Company began a new business,
Sentaur Corp. ("Sentaur") engaged in medical billing recovery, a new business
segment. The business provides benefits to the hospital segment of the
healthcare industry by recouping inappropriate discounts taken from hospital
billings by institutional or insurance payors. Sentaur began generating revenue
during the second quarter of 2003. The Company records revenues net for this
business, having acted as an agent of the hospitals.
Three of the Company's customers currently accounted for approximately
77% of its 2004 continuing revenues to date and three customers accounted for
approximately 74% of its outstanding trade receivables at June 30, 2004. Of
those three, the Company receives funds from one entity in the automotive
segment as described in Note 6.
8
3. DEFINITIVE AGREEMENT SIGNED FOR POTENTIAL ACQUSITIONS, CHANGE OF
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CONTROL AND CHANGE IN BUSINESS MODEL
------------------------------------
On May 17, 2004 the Company signed a definitive agreement ("the Share
Exchange Agreement") with Pacific Ethanol Inc., a California company, Kinergy
Marketing, LLC, an Oregon limited liability company, and Re-Energy, LLC, a
California company, (collectively hereinafter referred to as the "PEI Group")
all of which are geographically located in California, to acquire those
companies in exchange for a maximum of 18.8 million shares on a fully diluted
basis (of which approximately 2.6 million shares would be reserved to replace
existing PEI Group options and for its convertible debt, if converted) of
Accessity common stock. The transaction is structured as a stock-for-stock share
exchange; with Accessity continuing as the surviving parent company and the PEI
Group entities becoming wholly owned subsidiaries of Accessity.
Privately held PEI Group, has developed a strategy aimed at becoming
the first vertically integrated producer and marketer of ethanol in California,
the nation's most populous state with the highest ethanol demand in the United
States. Effective January 1, 2004 the State of California mandated the
elimination of MTBE as a gasoline additive and required the use of ethanol as
its replacement to improve air quality resulting from auto emissions. The
California ethanol market is currently estimated to be annually approximately
900 million gallons, based on published market reports, and approximately $1
billion dollars. At present, through Kinergy Marketing LLC, PEI Group is
presently a re-seller of ethanol and its unaudited results indicated that it
generated approximately $37 million in revenue in the six months ended June 30,
2004. PEI Group owns land and a grain processing facility and has received the
critical permits to begin construction of a 35 million gallon ethanol plant on
its property in Madera, California. PEI Group believes this will be the largest
ethanol plant in California. Funding for the production facility and working
capital is expected to be provided in part through bank lending, a term sheet
has been received from a large bank lending institution to provide debt of $25
million subject to certain conditions precedent, including equity requirements,
and the remaining part through other debt or equity arrangements which are
currently being negotiated.
Under the terms of the Share Exchange Agreement, which is subject to
satisfactory completion of due diligence and shareholder approval, the existing
directors, officers and employees of the Company would terminate their positions
with Accessity. The existing business operations of Sentaur, and the royalty
stream from ClaimsNet (see Note 6), the building lease and related personal
property, would be spun off and become the responsibility of CEO and founder
Barry Siegel in lieu of cash payments required under his employment contract.
Thereafter, the management of Accessity would be transferred to the management
of the PEI Group, however the present Accessity Board of Directors will have the
right to nominate one director with a term that expires until the 2005 Accessity
shareholders meeting. The remaining assets, including all of the Company's cash
and investment funds, certain prepaid and other assets and selected liabilities,
would be retained under the control of the new management of the PEI Group. In
addition, the Share Exchange Agreement requires Accessity to prosecute the
lawsuit against Presidion's investment bankers, the Mercator Group LLC, Global
Taurus LLC, et al, for in excess of $100 million, as described in the Company's
December 31, 2003 Form 10-KSB (also see Note 5). The proceeds, if any, from a
successful outcome of this suit, after the payment of legal fees, will be
distributed to current Accessity shareholders, on the date of closing of the
transaction with the PEI Group, two-thirds of any recovery from this suit with
9
the remaining one-third being paid the Company. In the event Accessity
terminates the Share Exchange Agreement for a Superior Proposal, as defined in
the Share Exchange Agreement, Accessity will pay the expenses of the other
parties up to a maximum amount of $150,000.
The Company is currently preparing its proxy to be filed with the
Securities and Exchange Commission and, upon its review, will forward the proxy
to its shareholders and schedule a shareholder meeting to vote for approval of
the transaction. The Company has also been in communication with the Nasdaq
Stock Market which has deemed this proposed transaction with the PEI Group as a
"Reverse Merger" and therefore, would require the Company to file an Initial
Listing Application for continued listing of the Company's stock on the Nasdaq
SmallCap Stock Market subsequent to the closing of this transaction.
On August 4, 2004, the Company signed Amendment No.1 to the Share
Exchange Agreement revising certain non-material language in the agreement and
extending the date upon which the Share Exchange Agreement shall terminate
should the contemplated transaction not close, from July 31, 2004 to October 29,
2004.
4. PREFERRED STOCK REPURCHASE
--------------------------
In connection with the sale of the Company's former wholly-owned
subsidiary, driversshield.com FS Corp. ("FS"), its collision repair and fleet
services business, to PHH Vehicle Management Services, LLC, d/b/a PHH Arval
("PHH"), a subsidiary of the Cendant Corporation (NYSE, symbol CD) in February
2002 and, pursuant to the Preferred Stock Purchase Agreement, PHH acquired 1,000
shares of the Company's Series A Convertible Preferred Stock (the "Preferred
Shares") for $1.0 million. The Preferred Shares provided conversion, at the
holder's discretion, into 100,000 shares of the Company's common stock (subject
to adjustments for stock splits, re-capitalization and anti-dilution
provisions).
Effective May 13, 2004, in exchange for certain mutual releases and the
amendment of the Stock Purchase Agreement dated October 29, 2001 resulting in
the extension of certain non-compete clauses in favor of PHH, the Company and
PHH entered into a Stock Repurchase Agreement providing the Company, or its
assigns, with the right to repurchase these Preferred Shares for $350,000.
Pursuant to the terms of the Stock Repurchase Agreement, the Company is required
to repurchase the Preferred Shares only in the event that the arbitration matter
between the Company and Presidion Solutions, Inc. (Note 5) is successfully
concluded in favor of the Company, and the award has been fully collected. In
June 2004 the arbitrator ruled in favor of the Company, and as of July 28, 2004
the Company had collected $189,000. The balance of $91,000 is expected to be
collected on August 28, 2004. Under the terms of the Stock Repurchase Agreement,
PHH may exercise its right to convert all, but not less than all, of its
Preferred Shares into common stock, so long as it precedes the Company's
election to repurchase the stock, through the termination date of September 15,
2004.
The Company has reclassified its preferred stock out of the equity
section, and into a liability account, at fair value, since the redemption of
its preferred stock is outside the control of the Company.
10
5. AWARD GRANTED TO COMPANY IN ARBITRATION MATTER
----------------------------------------------
During June 2004 the Company received notice that the arbitration
proceedings under the auspices of the American Arbitration Association had
concluded that the Company was entitled to the $250,000 break-up fee set forth
in the Memorandum of Understanding ("MOU") between the Company and Presidion
Solutions, Inc. ("Presidion"), as well as its share of the costs of the
arbitration and interest from the date of the termination of that agreement by
Presidion, aggregating approximately $30,000. As described more fully in the
Company's Form 10-KSB for the year ended December 31, 2003, the Company and
Presidion had entered into a MOU with the contemplation of merging Presidion
into the Company. Subsequently, Presidion breached the MOU and the Company filed
for arbitration. According to the arbitration terms, Presidion was provided
thirty days to make the payment. As an accommodation, the Company accepted an
initial payment of $98,332 on June 28, 2004, and an interest-bearing promissory
note, in the aggregate amount of $181,358, comprising two payments of
approximately similar amounts to be made on July 28 and August 27, 2004. The
Company received the first payment on the note on July 28, 2004. The note bears
interest on the unpaid balance at 7% per annum. The arbitration award for the
break-up fee and interest is included in Investment and Other Income in the
accompanying Condensed Consolidated Statement of Operations and Comprehensive
Loss. The Company also received a Confession of Judgment from Presidion to
facilitate a court order in the event the note is not paid in full.
6. STRATEGIC PARTNERSHIP FOR INSURANCE BUSINESS
--------------------------------------------
In December 2002, the Company entered into a Strategic Partnership
Agreement (the "Partnership Agreement"), effective January 2, 2003, with
ClaimsNet, a wholly-owned subsidiary of the CEI Group, Inc. ("CEI"), a
Pennsylvania corporation, in which ClaimsNet assumed the responsibilities of
servicing the operations and management of DriverShield CRM, the business that
provided insurance carriers with collision repair management for their insureds.
During 2003 the Company processed only those claims that were initiated prior to
the effective date, and ClaimsNet has assumed responsibility for new repairs.
The Company granted an exclusive license of its technology, including its
website software, that enables insurance customers to access the vehicle claims
management system via the Internet, and a non-transferable license of its
network of repair facilities, as well as training of its processing
methodologies, in order for ClaimsNet to fulfill its obligations under the
Partnership Agreement. As consideration, ClaimsNet remits a share of the profits
to the Company equivalent to 25% of vendor referral fees for repairs initiated
and completed, beginning in March 2003, and 50% of administrative fees, as
defined, on all existing customers, beginning in February 2003, as well as15% of
all administrative and vendor referral fees for all new customers that use the
licensed technology to have their vehicles repaired. The term of the partnership
is for a five year period with two consecutive one year renewals. The contract
also grants ClaimsNet an option to purchase this business, pursuant to a
formula, beginning January 1, 2007.
For the six months ended June 30, 2004 and 2003 the Company recorded
fees from ClaimsNet of $95,000 and $53,000 respectively. As part of the
agreement, during the quarter ended March 31, 2003, the Company incurred $12,000
for certain personnel costs associated with the transition. There were no
comparable costs in the 2004 Quarter.
11
7. DISCONTINUED OPERATIONS OF AUTOMOBILE AFFINITY SERVICES BUSINESS AND
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SALE TO RELATED PARTY
---------------------
Upon approval of its board of directors, the Company negotiated a Stock
Purchase Agreement ("the ADS Agreement"), effective August 1, 2003, for the sale
of all of the outstanding shares of its wholly owned subsidiary, DriverShield
ADS Corp. ("ADS") to an employee who is the president of this business. Under
the terms of the ADS Agreement the Company received a one-time fee of $10,000 on
September 30, 2003, plus it received reimbursement for its legal fees of
approximately $10,000 incurred for this sale. As a component of the transaction,
the individual purchaser also agreed to forego all future rights to receive
compensation and other benefits associated with his employment contract, which
was to expire in December 2004, but terminated on July 31, 2003. All of the
employees and related costs of the ADS business were borne by the purchaser as
of the effective date, and the Company has no continuing management of, or
responsibility for, the operations. The net liabilities of the business at the
closing date, of approximately $31,000, consisting of primarily accounts
receivable and payable, were retained by the Company.
The purchaser of the ADS business, Barry J. Spiegel, was one of the
four members of the Board of Directors of the Company, and a significant
shareholder, who retained his seat on the Board of Directors until he resigned
in May, 2004. With the completion of this transaction, the Company had exited
from all operating activities of its various automotive businesses.
The operating results of the affinity services business have been
presented as discontinued operations in the accompanying financial statements.
The Company recorded a net gain of $10,000 on the transaction in the quarter
ended September 30, 2003.
Operating results during the three and six months ended June 30, 2003,
for the discontinued affinity services operations were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2003 2003
-------- --------
Revenues $142,000 $377,000
Cost of sales, selling, general and
administrative expenses (95,000) (189,000)
-------- --------
Income from discontinued operations, pre-tax $ 47,000 $188,000
8. EARNINGS (LOSS) PER SHARE
-------------------------
Basic earnings (loss) per common share is computed by dividing earnings
(loss) by the weighted average number of common shares outstanding during the
period. Diluted earnings per share reflect the potential dilution that could
occur if common stock equivalents, such as preferred stock, stock options and
warrants, were exercised. For the six months ended June 30, 2004 and 2003,
respectively, approximately 498,000 and 720,000 of potentially dilutive common
stock equivalents were excluded from the earnings per share calculations, as
their inclusion would have been anti-dilutive.
12
9. STOCK-BASED COMPENSATION PLANS
------------------------------
The Company issues stock options to its employees and outside directors
pursuant to stockholder-approved stock option programs, and accounts for
stock-based compensation plans under the intrinsic value method of accounting as
defined by Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations. No stock-based employee
compensation cost is reflected in net income (loss) for the three and six months
ended June 30, 2004 and 2003, as all options granted under these plans had an
exercise price equal to the fair market value of the underlying common stock on
the date of grant. See Note 10 for variable priced stock options. For pro forma
disclosures, the estimated fair value of the option is amortized over the
vesting period, which range from immediate vesting to three years. The following
table illustrates the effect on net income (loss) and earnings (loss) per share
if the Company had accounted for our stock option and stock purchase plans under
the fair value method of accounting under Statement 123, as amended by Statement
148:
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ------------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Net income (loss), as reported ($ 145,313) ($ 428,404) ($ 569,302) ($ 921,839)
Deduct: Total stock-based employee
compensation expense
determined under fair value-
based method for all awards,
net of related tax effects ($ 85,753) ($ 135,447) ($ 171,506) ($ 275,681)
------------ ------------ ------------ ------------
Pro forma net income (loss) ($ 231,066) ($ 563,851) ($ 740,808) ($ 1,197,520)
------------ ------------ ------------ ------------
Earnings (loss) per share:
Basic, as reported ($ .06) ($ .22) ($ .25) ($ .51)
Basic, pro forma ($ .10) ($ .26) ($ .33) ($ .55)
Diluted, as reported ($ .06) ($ .22) ($ .25) ($ .51)
Diluted, pro forma ($ .10) ($ .26) ($ .33) ($ .55)
10. NON-CASH COMPENSATION FOR VARIABLE PRICED OPTIONS
-------------------------------------------------
In October 1999 the Company repriced certain options previously granted
to employees and third parties, representing the right to acquire 440,000 shares
of common stock. The original grants gave holders the right to purchase common
shares at prices ranging from $5.00 to $6.20; these were repriced to prices
ranging from $3.75 to $4.15 per share. At the date of the repricing, the new
exercise price was equal to the fair market value of the shares (110% of the
fair market value in the case of an affiliate). In addition, in September 2002
the Company granted a five-year extension to the life of certain fully vested
options that had expired. Pursuant to FASB Interpretation No. 44, the Company
accounts for these as variable from the date of the modification until they are
exercised, forfeited or expired, and records the intrinsic value of such grants.
During the year ended
13
December 31, 2003 all of these options, except for 6,667, were either forfeited
or expired, There was no charge or credit during 2004, or comparable period in
2003, as the price per share of the Company's common stock traded at levels
below the exercise prices.
11. INVESTMENTS AND IMPAIRMENT OF SECURITIES
----------------------------------------
Investments at June 30, 2004 consist of available-for-sale securities
that had a fair market value of $3,544,000.
The Company evaluates its individual securities holdings to determine
whether it believes that a decline in investment value may be permanent or
other-than-temporary. In the quarter ended June 30, 2004 the Company recognized
an impairment, characterized as other-than-temporary, of approximately $73,000,
which included the unrealized losses previously reported as the sole component
of comprehensive losses, and most of the decrease in value in the current
quarter. While the total return for each of its income securities covering the
most recent twelve month period has been positive, the Company considered that
the increasing interest rate environment, which has resulted in decreasing
prices for each of the fixed income mutual funds that the Company held at June
30, 2004, would continue. Further, in order to support its current operating
losses, the Company periodically sells some portion of its investment holdings
which may preclude its ability to hold securities sufficiently to realize its
initial investment. In July 2004 the Company made the decision to sell one of
its investment positions, which represented $33,000 of the impairment amount
noted above, concluding that its total return no longer justified the market
risk environment.
The investment balance, shown above, is valued at fair market value and
accordingly already reflects the impairment.
12. PROFORMA INFORMATION
--------------------
Proforma information, assuming that the disposal of ADS occurred at the
beginning of the earliest quarterly period presented, has not been presented
since the disposal has been accounted for as discontinued operations, and such
amounts have been reclassified from continuing operations.
13. INCOME TAXES
------------
At December 31, 2003, the Company had operating loss carry forwards of
approximately $3,800,000 and had established a valuation allowance for the full
amount of its deferred tax asset as it is more likely that the Company will not
be able to realize the tax benefits. To the extent the Company is profitable in
the future periods such carry forwards may be available to offset future taxable
earnings. To the extent the Company is not profitable it would not be able to
realize this benefit. In the event the transaction with the PEI Group is
consummated, there may be limitations on the amount of the net operating loss
carryforward which may be utilized pursuant to the Internal Revenue Code.
14
14. FLORIDA OFFICE LEASE AND RELATED PARTY TRANSACTION
--------------------------------------------------
The 7,300 square foot building in Coral Springs, Florida which the
Company leases for its headquarters is owned and operated by B & B Lakeview
Realty Corp., whose three shareholders, Barry Siegel, Barry Spiegel and Ken
Friedman are, or previously were, members of the Company's Board of Directors.
In accordance with the terms of the lease, the Company paid required rentals to
B & B Lakeview Realty of approximately $33,000 in the current quarter and
$66,000 during the 2004 Period. Pursuant to the lease agreement, the Company is
also required to pay various building maintenance, insurance and other specified
charges, as incurred, to other unrelated vendors. It was also required to
establish a restricted depository account, in the amount of $300,000, as
described in the Liquidity and Capital Resources section of Managements
Discussion and Analysis or Plan of Operation.
15. SEGMENT INFORMATION
-------------------
The Company currently reports two segments, medical and automotive. As
described in Note 6, however, the Company participates in the automotive segment
only through a profit-sharing arrangement; it no longer operates, or has
liability for, the current activities of the automotive segment, which function
under the managerial autonomy of ClaimsNet, pursuant to its contractual
arrangement with the Company. The Company manages these segments separately
since each serves different markets and users, as described in Note 2.
All of the Company's sales are made within the domestic United States.
Segment information follows.
Six Months Ended June 30, Three Months Ended June 30,
------------------------------ ------------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Revenue:
Medical $ 144,000 $ 63,000 $ 330,000 $ 63,000
Automotive 55,000 49,000 95,000 190,000
------------ ------------ ------------ ------------
Consolidated total $ 199,000 $ 112,000 $ 425,000 $ 253,000
Segment profit (loss):
Medical (1) $ (35,000) $ (58,000) $ (25,000) $ (181,000)
Automotive (1) 30,000 (13,000) 46,000 (27,000)
Other/corporate (1) (140,000) (405,000) (590,000) (902,000)
------------ ------------ ------------ ------------
Consolidated total $ (145,000) $ (476,000) $ (569,000) $ (1,110,000)
Segment profit or (loss) reflects continuing operations before provision for
income taxes (benefit).
Identifiable assets at June 30, 2004:
Medical $ 117,000
Automotive 94,000
Other, corporate 4,647,000
------------
Consolidated total $ 4,858,000
(1) The Company does not allocate taxes, other income, interest income or
expense, or its corporate general and administrative expenses to its individual
segments. The segment profit (loss) shown above reflects those costs that are
directly and specifically identifiable with the operating activities of the
segment.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
-------------------------------------------------------------------
Forward Looking Statements - Cautionary Factors
The following discussion and analysis should be read in conjunction
with the Company's financial statements and the notes hereto appearing elsewhere
in this report. This report contains forward-looking statements within the
meaning of the Private Securities Litigation Act of 1995. The Company cautions
that forward-looking statements are not guarantees of future performance and
involve certain risks and uncertainties (including those identified in "Risk
Factors" in the Company's Form 10-KSB for the year ended December 31, 2003 and
Form 8-K dated May 17, 2004) and that actual results may differ materially from
those in the forward-looking statements as a result of various factors. Except
for the historical information and statements contained in this Report, the
matters and items set forth in this Report are forward looking statements.
THREE MONTHS ENDED JUNE 30, 2004 (THE "2004 QUARTER") COMPARED TO THREE MONTHS
------------------------------------------------------------------------------
ENDED JUNE 30, 2003 (THE "2003 QUARTER").
-----------------------------------------
The 2004 Quarter reflected a net loss of $145,000 compared to a net
loss of $428,000 in the 2003 Quarter. Loss from continuing operations was
$145,000 in the 2004 Quarter versus a loss of $476,000 in the 2003 Quarter; a
reduction in losses of 70%. The reduction was largely attributable to a one-time
arbitration award of $280,000 resulting from a breach of an agreement. Basic and
diluted loss per share from continuing operations was $.06 and $.22 per share in
the 2004 and 2003 Quarters respectively. Basic and diluted income per share from
discontinued operations was zero in the 2004 Quarter and $.02 in the 2003
Quarter.
REVENUES FROM CONTINUING OPERATIONS
-----------------------------------
Revenues were $199,000 in the 2004 Quarter, versus $112,000 in the 2003
Quarter, representing an increase of $87,000 or 78%. Revenues increased by
$6,000 in the Company's automotive segment, from $49,000 in the 2003 Quarter to
$55,000 in the 2004 Quarter. The revenues that the Company recorded from its
automotive segment reflect its share of fees from claims processed by ClaimsNet.
Sentaur revenues increased $82,000 to $145,000 in the 2004 Quarter from $63,000
in the 2003 Quarter when its revenues commenced. However, Sentaur revenues
declined from the first calendar 2004 quarter and it is currently not supporting
its direct expenses and is losing money. A few of its existing contracts are now
winding down, and Sentaur's new contracts were not sufficient to offset the
declining revenues.
OPERATING INCOME AND EXPENSES FROM CONTINUING OPERATIONS
--------------------------------------------------------
Losses from continuing operations decreased 70%, to $145,000 in the
2004 Quarter compared to a loss of $476,000 in the 2003 Quarter, a decrease in
losses of $331,000. The comparative amounts are described below.
Collision repair expense relating to its automotive repair business
decreased to zero in the 2004 Quarter versus $3,000 in the 2003 Quarter
resulting from the transfer of the business to ClaimsNet, described above.
16
Selling expenses incurred by the Company's Sentaur business, which were
relatively comparable on a quarter-to-quarter basis, increased by $7,000 (6%),
to $117,000 in the 2004 Quarter, from $110,000 in the 2003 Quarter.
General and administrative expenses, which were also relatively
comparable on a quarter-to-quarter basis, decreased by $17,000 (4%), from
$433,000 in the 2003 Quarter to $416,000 in the 2004 Quarter
Depreciation declined $25,000, from $85,000 in the 2003 Quarter to
$60,000 in the 2004 Quarter, resulting from assets which became fully
depreciated.
Investment and other income, net, increased $192,000 from $44,000 in
the 2003 Quarter to $236,000 in the 2004 Quarter. Other income in the 2004
Quarter included $272,000 (excluding reimbursed arbitration costs) from
Presidion resulting from an arbitration award from their breach of an agreement
with the Company. The Company was awarded $250,000 for the stipulated break-up
fee, plus certain costs and interest. Offsetting the award was a non-cash
impairment of $73,000 recorded on marketable securities which recognized most of
the unrealized losses incurred on fixed income mutual funds. Aside from
arbitration award and the impairment, investment and other income declined
$7,000 resulting primarily from declining investment balances and lower interest
rates.
The Company also recorded a tax credit to be repaid by the New York
State Department of Taxation and Finance in the 2004 Quarter resulting from
overpayments in the prior taxable year. There was no such amount in the 2003
Quarter.
DISCONTINUED OPERATIONS
-----------------------
Discontinued operations in the 2003 Quarter, reflects the net operating
results of the affinity services subsidiary which was sold effective August 1,
2003. In the 2004 Quarter there were no discontinued operations.
SIX MONTHS ENDED JUNE 30, 2004 (THE "2004 PERIOD") COMPARED TO SIX MONTHS ENDED
-------------------------------------------------------------------------------
JUNE 30, 2003 (THE "2003 PERIOD").
----------------------------------
The 2004 Period reflected a net loss of $569,000 compared to a net loss
of $922,000 in the 2003 Period. Loss from continuing operations was $569,000 in
the 2004 Period versus a loss of $1,110,000 in the 2003 Period; a reduction in
losses of $541,000, or 49%. The reduction was largely attributable to the
receipt of a one-time arbitration award of $280,000 resulting from a breach of
an agreement. Basic and diluted loss per share from continuing operations was
$.25 and $.51 per share in the 2004 and 2003 Period respectively. Basic and
diluted income per share from discontinued operations was $.09 in the 2003
Period and zero in the 2004 Period.
REVENUES FROM CONTINUING OPERATIONS
-----------------------------------
Revenues were $425,000 in the 2004 Period, versus $253,000 in the 2003
Period, representing an increase of $172,000 or 68%. The Company's revenues
decreased by $95,000 in its automotive segment, from $190,000 in the 2003 Period
to $95,000 in the 2004 Period as a result of transferring the operating
responsibility of its CRM business to ClaimsNet, effective January 2003.
However, as described below, the significant reduction in infrastructure costs
eliminated the direct expenses and losses from this business
17
segment (excluding corporate overhead which the Company does not allocate to its
operating units). The revenues the Company recorded in the 2004 Period reflect
referral fees associated with claims processed by ClaimsNet. Offsetting the
reduction in revenues from its automotive segment was an increase in revenues of
$267,000 from Sentaur, the Company's financial recovery business for hospitals.
Its revenues increased from $63,000 in the 2003 Period to $330,000 in the 2004
Period. Sentaur commenced recording revenues in April 2003 and there were only
three months billings in the 2003 Period. While revenues have increased, Sentaur
is currently losing money and not supporting its direct expenses.
OPERATING INCOME AND EXPENSES FROM CONTINUING OPERATIONS
--------------------------------------------------------
Losses from continuing operations decreased 49%, to $569,000 in the
2004 Period compared to a loss of $1,110,000 in the 2003 Period, a decrease in
losses of $541,000. The comparative amounts are described below.
Collision repair expense relating to its automotive repair business,
decreased to zero in the 2004 Period versus $101,000 in the 2003 Period
resulting from the transfer of the business to ClaimsNet, described above.
Selling expenses decreased by $26,000 (10%), to $223,000 in the 2004
Period, from $249,000 in the 2003 Period. This was the result of lower selling
expenses for all business activities including Sentaur and other corporate
marketing activities, including some transition marketing expenses incurred for
CRM in the 2003 Period for which there was no comparable amount in the 2004
Period.
General and administrative expenses increased by $11,000 (1%), from
$930,000 in the 2003 Period to $941,000 in the 2004 Period. Increased legal
expenses relating to our claim against Presidion Solutions, Inc. which was
arbitrated (and an award granted to the Company) in the 2004 Period, as well as
two other claims (as described in the Company's December 31, 2003 10-KSB), one
in which it is a plaintiff and one as a defendant, are the primary reasons for
the increase. In addition, the Company has incurred legal expenses associated
with due diligence for the PEI Group transaction. During the 2004 Period the
Company incurred legal expenses totaling $172,000, versus $133,000 in 2003 the
Period, an increase of $39,000. Excluding legal costs, all other general and
administrative expenses in the aggregate declined by $23,000.
Depreciation declined $50,000, from $169,000 in the 2003 Period to
$119,000 in the 2004 Period, resulting from assets which became fully
depreciated.
Investment and other income, net, increased $189,000 from $87,000 in
the 2003 Period to $276,000 in the 2004 Period. Other income in the 2004 Period
included $272,000 (excluding reimbursed arbitration costs) from Presidion
resulting from an arbitration award from their breach of an agreement with the
Company. The Company was awarded $250,000 for the stipulated break-up fee, plus
certain costs and interest. Offsetting the award was a non-cash impairment of
$73,000 recorded on marketable securities which recognized most of the
unrealized losses incurred on fixed income mutual funds. Aside from arbitration
award and the impairment, other income declined $10,000 resulting primarily from
declining investment balances and lower interest rates.
18
The Company also recorded a tax credit to be repaid from the New York
State Department of Taxation and Finance in the 2004 Period resulting from
overpayments in the prior taxable year. There was no such amount in the 2003
Period.
DISCONTINUED OPERATIONS
-----------------------
Discontinued operations in the 2003 Period, reflects the net operating
results of the affinity services subsidiary which was sold effective August 1,
2003. In the 2004 Period there were no discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
As of June 30, 2004 the Company had cash and cash equivalents of
$231,000. The Company also holds shares in a number of highly liquid mutual
funds valued at $3,544,000. Working capital of the Company as of June 30, 2004
was $3,440,000 and its working capital ratio was 5:1.
In connection with the Company's rental of office space in Florida, in
July 2002, the Company was required to establish a $300,000 restricted cash
fund, initially invested in a certificate of deposit, with a Florida bank for
the five and a half year term of the lease, as a guarantee of its future rental
commitments. Such amounts are excluded from liquidity and working capital,
described above, and presented as restricted cash. The restricted fund amount
declines as the remaining rental commitment declines, as follows; the balance of
the certificate will be $200,000 after the 36th month, $100,000 after the 48th
month, and zero after 60 months.
The Company has no major expenditures that it currently anticipates for
capital equipment, however it is expending funds due to operating losses,
including funding the growth of its Sentaur business unit. As Sentaur obtains
new hospital customers and seeks to expand its sales, it may require additional
funds for personnel expenses and software systems development, but this would
occur in anticipation of future revenue growth. Should we not complete the
transaction with the PEI Group described above in Note 3, we would expect to use
our resources to support Sentaur's growth during the remainder of 2004 and
thereafter. Also, the Company incurred an unusually high level of legal expense
in the 2004 Period in connection with three claims; two of which the Company is
the plaintiff ( it has won one of those cases as discussed in Note 5 above) and
one in which it is the defendant. We anticipate this level of legal costs will
decline.
In addition, the Company has spent considerable management effort and
time pursuing acquisition candidates, and has incurred varying levels of
expenses in connection with each evaluation. These have ranged from minor
amounts for such expenses as an initial business trip or, more extensively,
multiple trips for due diligence, legal review and lien and judgment searches.
We are currently expending funds for the transaction with the PEI Group
described in Note 3, above. Should we not complete this transaction, and seek
another acquisition, we may use a significant amount of our funds to either pay
a portion of the purchase price and/or expand the business we acquire.
The Company believes that its present liquidity will enable it to
continue to support its operations, as they are currently configured for our
continuing business, for the next twelve months and for an extended period
thereafter depending on the extent of use of its funds to build existing
businesses or possible use of funds to develop or acquire new businesses.
19
CONTEMPLATED TRANSACTION
The Company announced on May 17, 2004 that it has signed a share
exchange agreement to acquire Pacific Ethanol, Inc., Kinergy Marketing, LLC and
Re-Energy, LLC in a stock-for-stock share exchange transaction. Upon
consummation of the share exchange, each of the acquired companies will become
wholly-owned subsidiaries of Accessity Corp. and Accessity Corp. will
re-incorporate in the State of Delaware and change its name to Pacific Ethanol,
Inc.
Accessity Corp. will issue approximately 18.8 million shares to acquire
all the companies in this transaction. It is contemplated that the combined
company will have approximately 22 million shares of common stock outstanding,
on a fully-diluted basis, should all options and warrants be exercised following
consummation of the share exchange transaction.
The proposed share exchange, expected to be completed as quickly as
possible, is subject to satisfaction of due diligence investigations by all of
the parties, approval by a majority of Accessity's shareholders and certain
other additional conditions to closing including completion of audits of Pacific
Ethanol, Kinergy Marketing and Re-Energy. As a further condition to the
completion of the acquisitions, the current management of Accessity will resign
and the current management of the acquired companies will assume management of
the combined companies. The former Board of Directors of Accessity will
designate one person to serve on the board of directors of Pacific Ethanol until
the 2005 annual shareholders meeting. [See Note 3 to the Financial Statements
herein]
ITEM 3. CONTROLS AND PROCEDURES
--------------------------------
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we evaluated
the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in ss.240.13a-15(e) or 240.15d-15(e) under the Exchange
Act) as of June 30, 2004. Based upon that evaluation required by section
ss.240.13a-15 or 240.15d-15 under the Exchange Act, the Chief Executive Officer
and Chief Financial Officer concluded that, our disclosure controls and
procedures were effective in timely alerting them to the material information
relating to us (or our consolidated subsidiaries) required to be included in our
periodic SEC filings.
CHANGES IN INTERNAL CONTROLS.
There were no significant changes made in our internal controls during
the period covered by this report, or to our knowledge, in other factors that
could significantly affect these controls subsequent to the date of their
evaluation.
20
PART II. OTHER INFORMATION
--------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
(a) EXHIBITS
10.1 Share Exchange Agreement dated May 12, 2004 by and among
Accessity Corp., a New York corporation Pacific Ethanol, Inc.,
a California corporation ("PEI"); Kinergy Marketing, LLC, an
Oregon limited liability company ("Kinergy"); Reenergy, LLC, a
California limited liability company ("Reenergy,"; each of the
shareholders of PEI identified on the signature pages thereto
(collectively, the "PEI Shareholders"); each of the holders of
options or warrants to acquire shares of common stock of PEI
identified on the signature pages thereto (collectively, the
"PEI Warrantholders"); each of the limited liability company
members of Kinergy identified on the signature pages thereto
(collectively, the "Kinergy Members"); each of the limited
liability company members of Reenergy identified on the
signature pages thereto (collectively, the "Reenergy Members")
10.2 Amendment No. 1 to Share Exchange Agreement made and entered
into on July 29, 2004 by and among Accessity Corp., a New York
corporation Pacific Ethanol, Inc., a California corporation
("PEI"); Kinergy Marketing, LLC, an Oregon limited liability
company ("Kinergy"); Reenergy, LLC, a California limited
liability company ("Reenergy,"; each of the shareholders of
PEI identified on the signature pages thereto (collectively,
the "PEI Shareholders"); each of the holders of options or
warrants to acquire shares of common stock of PEI identified
on the signature pages thereto (collectively, the "PEI
Warrantholders"); each of the limited liability company
members of Kinergy identified on the signature pages thereto
(collectively, the "Kinergy Members"); each of the limited
liability company members of Reenergy identified on the
signature pages thereto (collectively, the "Reenergy Members")
31.1 Certification of Chief Executive Officer
31.2 Certification of Chief Financial Officer
32.1 Certification of Chief Executive Officer
32.2 Certification of Chief Financial Officer
(b) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K dated March 31,
2004 disclosing a press release that announced the Company's financial
results for the period ended March 31, 2004.
The Company filed a Current Report on Form 8-K dated May 17,
2004 disclosing a press release that announced the execution of the
Share Exchange Agreement, by and among the Company and Pacific Ethanol
Inc., Kinergy Marketing, LLC, and Re-Energy LLC. for the Company to
acquire each of these entities as wholly owned subsidiaries in a share
exchange transaction.
21
SIGNATURES
----------
Pursuant to the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Accessity Corp.
Date: August 16, 2004 By: Barry Siegel
------------
Chairman of the Board, President
and Chief Executive Officer
Date: August 16, 2004 By: Philip B. Kart
---------------
Senior Vice President, Treasurer,
Secretary and Chief Financial Officer
22
INDEX OF EXHIBITS
-----------------
10.1 Share Exchange Agreement dated May 12, 2004 by and among
Accessity Corp., a New York corporation Pacific Ethanol, Inc.,
a California corporation ("PEI"); Kinergy Marketing, LLC, an
Oregon limited liability company ("Kinergy"); Reenergy, LLC, a
California limited liability company ("Reenergy,"; each of the
shareholders of PEI identified on the signature pages thereto
(collectively, the "PEI Shareholders"); each of the holders of
options or warrants to acquire shares of common stock of PEI
identified on the signature pages thereto (collectively, the
"PEI Warrantholders"); each of the limited liability company
members of Kinergy identified on the signature pages thereto
(collectively, the "Kinergy Members"); each of the limited
liability company members of Reenergy identified on the
signature pages thereto (collectively, the "Reenergy Members")
10.2 Amendment No. 1 to Share Exchange Agreement made and entered
into on July 29, 2004 by and among Accessity Corp., a New York
corporation Pacific Ethanol, Inc., a California corporation
("PEI"); Kinergy Marketing, LLC, an Oregon limited liability
company ("Kinergy"); Reenergy, LLC, a California limited
liability company ("Reenergy,"; each of the shareholders of
PEI identified on the signature pages thereto (collectively,
the "PEI Shareholders"); each of the holders of options or
warrants to acquire shares of common stock of PEI identified
on the signature pages thereto (collectively, the "PEI
Warrantholders"); each of the limited liability company
members of Kinergy identified on the signature pages thereto
(collectively, the "Kinergy Members"); each of the limited
liability company members of Reenergy identified on the
signature pages thereto (collectively, the "Reenergy Members")
31.1 Certification of Chief Executive Officer
31.2 Certification of Chief Financial Officer
32.1 Certification of Chief Executive Officer
32.2 Certification of Chief Financial Officer
23